By Ben Leubsdorf 

JACKSON HOLE, Wyo.--The Federal Reserve's No. 2 official said there is "good reason" to think sluggish U.S. inflation will firm and move back toward the U.S. central bank's 2% annual target, touching on a significant assessment facing the Fed ahead of its September policy meeting.

"Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding inflation down--oil prices and import prices, particularly--dissipate further," Fed Vice Chairman Stanley Fischer said Saturday at the Federal Reserve Bank of Kansas City's annual economic symposium.

In its last policy statement, the Fed said its first interest-rate increase will come after "some further improvement in the labor market" and when officials are "reasonably confident" inflation will move back to the central bank's 2% annual target. Mr. Fischer, speaking less than three weeks before the Fed's Sept. 16-17 meeting, didn't declare whether those conditions had been fulfilled. "I will not and indeed cannot tell you what decision the Fed will reach by Sept. 17," he said.

He said the Fed awaits the Labor Department's August jobs report on Sept. 4. The past three months have seen monthly nonfarm payrolls growth average 235,000, "well above the amount needed to continue the strengthening of the labor market," he said.

As for inflation, "with regard to our degree of confidence in this expectation, we'll need to consider all the available information, and factors relevant to certainty and uncertainty about those projections for the economic outlook, before we make that judgment," he said.

On Friday, Mr. Fischer told CNBC that "it's early to tell" what the Fed will do at its September meeting. Some policy makers in recent days have signaled support for beginning to raise short-term interest rates that have been pinned near zero since December 2008, while others have said recent financial-market volatility and worries about China's economy could justify delaying the long-awaited liftoff.

Mr. Fischer said Saturday that Fed officials are following "developments in the Chinese economy and their actual and potential effects on other economies, including and especially the United States, even more closely than usual." Later, in response to a questioner who said anticipation of a Fed rate increase was one factor behind the Chinese stock market's recent decline, he expressed skepticism. "The stock market went up...when people knew what our interest-rate policy was, and it collapsed...when they also knew what our interest-rate policy was, so I'm not quite sure which part of that might be the influence of the Fed, " he said.

When the time comes to raise rates, Mr. Fischer said, "we will most likely need to proceed cautiously" and with inflation low, "we can probably remove accommodation at a gradual pace. Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening."

In his remarks, Mr. Fischer discussed various forces that he said have restrained U.S. inflation, including declines in energy prices, softness in non-oil commodity prices, the strengthening of the dollar and slack in the economy.

Despite improvement in the labor market, "we have seen no clear evidence of core inflation moving higher over the past few years," Mr. Fischer said. "This fact helps drive home one important point,...that while much evidence points to at least some role for slack in helping to explain movements in inflation, this influence is typically estimated to be modest in magnitude, and can easily be masked by other factors."

The decline in energy prices over the past year "ought to be largely a one-off event," he said, but he added that it is "plausible" to think the dollar's rise will restrain output growth "through 2016 and perhaps into 2017 as well."

An important factor, he said, is that longer-term inflation expectations "appear to have remained generally stable since the late 1990s." The Fed, however, should be "cautious in our assessment that our inflation expectations are remaining stable" in part because "measures of inflation compensation in the market for Treasury securities have moved down somewhat since last summer," he said.

But Mr. Fischer added that "you do need to be wearing your glasses to see" the decline in a chart, and that such movements "can be hard to interpret" and "may reflect factors other than inflation expectations, such as changes in demand for the unparalleled liquidity of nominal Treasury securities."

Mr. Fischer, the former governor of the Bank of Israel, spoke Saturday on a panel about inflation dynamics with Bank of England Gov. Mark Carney, European Central Bank Vice President Vítor Constâncio and Reserve Bank of India Gov. Raghuram Rajan.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

August 29, 2015 16:27 ET (20:27 GMT)